Pacira BioSciences, Inc.

Good day and thank you for standing by. Welcome to the Q2 2021 Pacira Biosciences, Inc. earnings call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, Please press star zero. I would now like to hand the conference over to your speaker today, Susan Mesko, Head of Investor Relations. Please go ahead.

Susan Mesko Thank you, Dawn, and good morning, everyone. Welcome to today's conference call to discuss our second quarter progress. Joining me as speakers on today's call are Dave Stack, Chairman and Chief Executive Officer, and Charlie Reinhart, Chief Financial Officer. Additional members of the PACIRA Executive Leadership Team are also here for our question and answer session. Before we begin, let me remind you that today's call will include forward-looking statements based on current expectations. Such statements represent our judgment as of today and may involve risks and uncertainties. For information concerning risk factors that could affect the company, please refer to our filings with the SEC, which are available from the SEC or our website. With that, I will now turn the call over to Dave Stack.

Thank you, Susan. Good morning, everyone, and thank you for joining us. We are taking a new approach on today's call, and we'll limit our prepared remarks to a few key highlights, allowing us to take more time for your questions. We made terrific progress in the first half of 2021, with momentum growing in the second quarter. Second quarter revenue of $135.6 million notably ramped up our bottom line, with adjusted EBITDA coming in at $50.3 million, both record levels for a single quarter despite ongoing COVID-related challenges within the elective surgery markets. All market dynamics point to the strong momentum continuing for the remainder of 2021 and beyond, reinforcing our outlook for growth over the next five years with expectations for ex-pareil annual sales growth percentages in at least the high teens, gross margins improving to the mid-80s, and modest increases in operating expenses. These key trends should allow Passura to deliver operating margins that exceed 50 percent within five years. I'll start with a quick update on the lawsuit filed against the American Society of Anesthesiology seeking damages and the retraction of three articles published in their journal, Anesthesiology. This process is in the early stages and our next step will be moving towards discovery to advance this case towards a resolution. While the timing is on exactly how this will play out is difficult to predict with any level of certainty, I can tell you that we are confident in our position that the publications are maliciously false and misleading. This is laid out clearly in the declarations on our website. We have not seen any material impact with XPREL's value proposition continuing to drive strong demand. At the same time, we cannot allow these false and misleading publications to be referenced as fact on a go-forward basis. Turning to the rollout of XPREL in pediatrics, we are now several weeks into the launch, and it's going even better than we anticipated. As you know, we deployed a thoughtful, gated approach to the launch, targeting KOL influencers. This has proven to be a winning formula as we are seeing a high level of acceptance from prominent thought leaders. For example, XPREL uses rapidly expanding in scoliosis surgery, which is one of the most extensive, invasive, and painful orthopedic procedures. Spine is a tight-knit group of like-minded surgeons who are highly motivated to minimize exposure of children and teens to opioids, given the population's elevated risk for persistent opioid use. We have been delighted with the high level of receptivity and enthusiasm from prominent thought leaders who are providing a rapid transfer of best practice for establishing expert-based protocols as the new standard of care, specifically in the near term through presentations at local and national pediatric meetings. Medical education is a core component of our pediatric strategy. our team is successfully securing the engagement of thought leaders from top children's hospitals. We are partnering with the top echelon of early adopters to deploy the education across their networks and spheres of influence using programs like fellowship training, ask the expert panels, technique workshops, and awareness campaigns. These key influencers are also generating data using Expirel in a broad range of procedures at leading institutions around the country, such as Reedy Children's, Texas Children's, Scottish Rite, and the Shriners Hospital Systems. We are now broadening our launch initiatives to our full customer-facing team and expect to trigger a chain reaction within the pediatric community that will ultimately shift Expirel-based multimodal protocols to the standard of care for this vulnerable patient population, replacing pumps and catheters-based pain management. The pristine safety profile of Expirel will continue to be the hallmark of our positioning across all pediatric and adult settings. This is validated by the over 8.8 million patients treated in the United States since launch. The pediatric indication and label further underscore the safety of our DepoFoam platform, which does not have any of the toxicity and safety warnings we have seen within the package inserts for other drug delivery technologies, specifically in the pain space. Shifting gears to women's health, COVID has escalated the need for many breasts plastic, and oncology surgeons to expedite discharge for their patients. With Expirel, they are now able to meet the needs of women who demand an opioid-free experience and who don't want to stay in the hospital overnight, while simultaneously optimizing their care experience through better pain management using Expirel-based ERAS protocols. C-section adoption continues to grow, and OB-GYN surgeons and anesthesiologists are leading the charge for evolving protocols to minimize opioids and provide new mothers with a better recovery experience after C-section. Looking ahead, we see this opportunity gaining additional traction as society meetings return to in-person settings to bring hands-on education and training to life. Turning to the lower extremity block, In May, we reported top-line results from our STRIDE study. STRIDE was designed to evaluate Expirel as a single-acting local analgesic with no preoperative multimodal therapy in the study design to bridge upfront coverage for Expirel, which differs from real-life practice. While the study did not achieve its high hurdle for the primary endpoint, We view the results as a highly valuable opportunity to work with the FDA on defining a pathway for adding a 96-hour indication to our label. We are preparing to meet and discuss the STRIDE study and our lower extremity nerve block strategy with the FDA in the third quarter. The design of the follow-on studies is underway. We believe these studies can be executed seamlessly as STRIDE gives us a strong foundation. We are currently planning a study evaluating a pulpateal sciatic nerve block in patients undergoing bunion surgery. We will only use those sites from STRIVE that were successful and followed appropriate protocol and technique. We are also initiating a phase three adductor canal field block study to provide specific package insert guidance for dose, volume, use of freebupivacaine, and administration technique. We intend to launch these studies in the second half of this year. Keep in mind that as far as our five-year plan, the stride outcome does not material impact our outlook, as we believe this is roughly a 15- to 18-month delay in achieving a lower extremity nerve block indication in the United States. Internationally, we remain on track to launch XPREL along with Iovera in Europe in October of this year. The year launch will focus on only these markets where we can secure pricing that closely aligns with the price in the United States. COVID has caused a tremendous backlog for orthopedic procedures in Europe, with waiting lists as long as two years. In addition, the typical length of stay in Europe is several days. These dynamics provide an optimal opportunity for both ExPRO and Ayurveda. The Placero portfolio will be positioned to enable rapid recovery after surgery to address the EU markets, high interest in accelerating recovery times and discharge, to increase surgical throughput, and address the post-COVID elective surgery backlog. For Expirel, our initial focus will be regional anesthesia protocol adoption in shoulder and total knee arthroplasty. For Alvera, we will begin by targeting painful osteoarthritis as well as total knee arthroplasty. We envision Alvera playing a key role in the long-term pain management, especially as surgeons and anesthesiologists work through the significant waiting list for elective procedures. Importantly, our broad efficacy label, which covers Expirel administration via infiltration, field blocks, and both upper and lower extremity nerve blocks, along with a superior safety profile, give us a clear competitive advantage in Europe, where Iovera is already approved. To remind everyone, Expirel is approved for a lower extremity nerve block in Europe. We recently expanded our global footprint in one of the fastest growing international markets, Latin America, through our partnership with Europharma. The Europharma team has considerable scale, expertise, and relationships to support X4L expansion. Our initial focus will be on Argentina, Brazil, Colombia, and Mexico. Europharma will be taking the lead in securing X4L regulatory approval as well. We have our first steering committee meeting next month to begin laying out our detailed strategy and timelines. To cover Iovera, Continued sales growth and an expanding customer base underscore the growing level of interest in our educational and commercial programs taking hold and highlight this novel cold technology and its ability to deliver drug-free and surgery-free pain control that endures for several months. Our PREPARE study is proceeding according to plan and set for readout later this year or early 2022. Our iOVERA registry is underway and will capture real-world evidence and TKA procedures and leading centers of excellence. In addition, we will roll out a Generation 2 iOVERA platform later this year, and our development team is successfully developing additional smart tips that will utilize the same handheld device with separate smart tips for low back pain procedures and specific spine procedures. Our clinical development team is also moving to the next cohort of our subarachnoid program for spinal administration and a depo-dexamethasone asset for particulate-free inflammation therapy. We remain very active in the business development front, having invested in both musculoskeletal and chronic pain spaces in the first half of this year. Looking ahead, we continue to advance these two key franchises with a focus on knee and spine continuums of care and bridging to chronic pain. We plan to use the combination of strategic investment that support promising early stage platforms like GeneQuine and SpineBioPharma and in licensing our acquisition transactions to build out a pipeline of innovation. In closing, we feel great about where we stand today and the market dynamics that we are seeing for both products. We will continue to build on our growing momentum and remain highly confident in our growth outlook. Looking ahead, we fully intend to lead the way by expanding the use of Exprel and Iovera and by investing in novel, innovative technologies that are synergistic with our goal to bring non-opioid pain management and regenerative health solutions to patients in need. With the experience and expertise of our management team, dedicated employees, and over $650 million in cash, we are excited about the short-term and the long-term future for Pacira to improve patient care. With that, I'll turn the call over to Charlie to cover a few key topics.